Three important ministers (PM Narendra Modi, FM Arun Jaitley and Minister of Commerce Nirmala Sitharaman) in the BJP-led NDA government have, at different points of time (beginning January 2014), spoken about ending tax terrorism in India. But unfortunately, they have only spoken and now it they are fast approaching six months of being in power and there has been no action on this front at all. In fact, during this time there have been ample opportunities for the government to walk the talk but they have stayed clear of making any positive statement.
The seven-year-old tax dispute with Vodafone (one of the main trigger points of Tax Terrorism) remains unresolved. What is worrisome is not the fact that the dispute remains unresolved, but the pin drop silence from the government on this issue. And what confounds us more are the news reports, which suggest that the present government has nothing new to bring on the table and is still following in the footsteps of the previous government. The sooner the government makes a move to solve this long standing dispute the better it will be for the image of the government.
Transfer pricing is another area where the government could have brought in some confidence building measures. A glaring example of lost opportunity in this area is the Bombay High Court landmark judgmenton Transfer Pricing in the case of Vodafone India. Transfer Pricing regulations have been a major contributor to the common perception that India has started following tax terrorism. The Bombay High Court clarified certain very important issues in the applicability of the Transfer Pricing regulations in India. Instead of seizing the opportunity and coming out in the open with its stand, the CBDT has been silent on the issue.
Last but not the least, the Swiss bank–black money issue. The shoddy handling of the matter by the government has assured us that political rhetoric will continue to guide the matter and rationale and logic will be far behind. It seems that the only place where overseas black money is stashed is Switzerland and in Switzerland it is HSBC and in HSBC there is only one branch in Geneva and in that branch there are accounts of some 600 odd Indians. The debate ends. There is no need to discuss the other Tax Havens etc. Oh yes the most important aspect of the debate is whether the names of these 600 odd Indian account holders should be made public or not. And of course create such an atmosphere in the country that the mere mention of a Swiss bank account smacks of criminality etc. This is ridiculous. No country in the world has handled such a delicate issue in this in this manner. There are countries like France and Germany who have taken the stand that in the Swiss bank issue what is more important than the identity is the recovery of the lost tax amount and the regularization of such bank accounts.
The government needs to realize that the industry is waiting for some confidence building measures on the Fiscal Policy before they commit any investments, and their expectations are high. If the government fails to walk the talk the industry will also do the same and only talk about making investments.
